GDP hits six-year high

  • Economic growth up by 5.2pc in current fiscal n Strong steps to increase savings urged
- PRITHVI MAN SHRESTHA
GDP hits six-year high

Jul 10, 2014-

Riding on a strong performance of the agriculture and service sectors, the country’s economic growth recorded a six-year high. The country’s economy is estimated to have grown by 5.2 percent in the current fiscal year, increasing per capita income of Nepalis by Rs 8,628 to Rs 71, 305, according to Economic Survey 2013-14.

Presenting the survey report at Parliament on Thursday, Finance Minister Ram Sharan Mahat attributed the growth to favourable climate, gradual improvement in investment climate and political situation, and timely budget.  

This is only the second instance in a decade that the country’s economy growth has crossed the 5 percent mark. The GDP growth had clocked 5.8 percent in fiscal year 2007-08.

“This is a positive dev-elopment,” noted Finance Minister Mahat. “However, huge trade deficit and declining savings of Nepalis remain a big challenge for the economy.”

According to the report, the agriculture sector grew at the second highest rate

in a decade thanks to good monsoon with the service sector also perfoming

equally well. “The good monsoon saw a relatively better growth in the agriculture sector, while the Constituent Assembly election in November 2013 contributed massively to the growth of the service sector,” said Former Finance Secretary Rameshore Khanal, adding that the election primed the pump in the banking, retail, communication and other service sectors.

The Finance Ministry had estimated the cash flow of Rs 50 billion during the CA election. On the other hand, the performance of manufacturing industries remained poor, the report suggests.

The manufacturing sector is expected to grow by a meagre 1.86 percent this fiscal year—the lowest in five years and third lowest in a decade—after the negative growth in 2007-08 and 2008-09.

Overall industrial sector growth, which also includes mines, electricity, gas, water and construction sectors, went up by  2.7 percent, a little higher than last fiscal year.

Although business confidence has improved, it has not translated into investments.

Economists say that investment in the industrial sector is a must to increase the economic productivity. “Productivity and job opportunities in the service sector has remained low. And it consists of more informal sectors,” observed Shankar Sharma, former vice-chairman of the National Planning Commission (NPC).

The survey shows the major economic indicators are in good condition. Export has grown at a healthy rate of 19.4 percent despite a massive import widening the trade deficit.

The balance of payment (BoP) is at surplus of Rs 102.81 billion and remittance has raised 22.2 percent to Rs 356.72 billion.

Inflation, which was 10.2 percent in the first eight months has eased to 8.9 percent, according to the report.

However, it has also pointed a number of challenges facing country’s economy including higher consumption compared to savings, energy crisis, lack of job opportunities for the youths, problems facing infrastructure projects, widening trade deficit and government’s failure to spend the capital budget.

Economists say power deficit and labour problems are continuing to hinder the growth of the manufacturing sector. “Reforms in these sectors are necessary and a second generation reforms could be helpful in bringing the investment into the industrial sector,” said Sharma.

The report has pointed out the need to build up savings to increase investments. At 8.9 percent, the gross domestic savings remains a big challenge to increase investment. The level of savings has waned over the last four years since peaking to 14 percent of gross domestic product (GDP) in 2010-11. It has come down to 8.9 percent in the current fiscal year.  

Finance Minster Mahat said translating the limited savings into investment is the biggest challenge facing the economy now. “Creating an investment-friendly environment is imperative to address the issue,” he said.

Published: 11-07-2014 09:04

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